On January 7, 2025, at 11:00:56 PM Singapore time, I placed an order for TMF (Direxion Daily 20+ Year Treasury Bull 3X Shares), a leveraged ETF that seeks to amplify daily returns on long-term US Treasury bonds. My order was filled shortly after placing it. However, I made a critical oversight by not considering the timing of important US economic data releases scheduled for that day. This mistake had a significant impact on the value of my investment shortly after the trade.
Impact of Economic Data Releases
Unbeknownst to me at the time, two key economic reports were released shortly after my order was executed:
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ISM Services Index: The ISM Services Index came in at 54.1%, higher than the market's expectations. This reading indicated that the US services sector, a major component of the economy, was experiencing stronger-than-expected growth. A higher ISM Services Index generally signals economic expansion, which often leads to higher expectations of inflation and potential interest rate hikes.
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Job Openings: The Job Openings report revealed that there were 8.1 million job openings, also exceeding market expectations. This suggested continued strength in the US labor market, reinforcing the narrative of a resilient economy.
Both reports contributed to a shift in market sentiment. Strong economic data often leads to concerns that the Federal Reserve may maintain higher interest rates for longer to combat inflation. Since TMF is highly sensitive to changes in interest rate expectations—due to its focus on long-term Treasury bonds—the stronger economic data likely triggered a selloff, pushing the price of TMF lower.
Direxion Daily 20 Year Plus Treasury Bull 3x Shares (TMF)
Unrealized Loss and Long-Term Perspective
As a result of these market movements, I am now holding an unrealized loss on my TMF position. However, I remain confident in the ETF as an investment. TMF is currently trading near its 52-week low, which I view as a potential buying opportunity rather than a cause for alarm. My belief is grounded in the expectation that economic conditions or Federal Reserve policies will eventually shift, favoring long-term Treasury bonds and potentially leading to a rebound in TMF's price.
While the unrealized loss is a reminder of the market's unpredictability, I see it as a temporary setback rather than a reason to abandon my investment thesis. TMF's near-term price movements are influenced by day-to-day market reactions, but its long-term performance aligns with macroeconomic cycles that I believe will work in its favor over time.
Lessons Learned
This experience has been a powerful learning moment. One of the key takeaways is the importance of understanding the economic calendar and its implications for market timing. US economic data releases, such as the ISM reports, Non-Farm Payrolls, and inflation figures, have a profound impact on financial markets, particularly on rate-sensitive assets like TMF.
Going forward, I plan to:
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Monitor Economic Calendars: Make it a habit to check for scheduled data releases on days I plan to trade. This information is widely available on platforms such as the Economic Calendar tools offered by financial news sites or trading platforms.
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Avoid Trading Near Major Releases: Refrain from entering or exiting trades just before critical economic data releases to minimize exposure to unexpected market volatility.
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Incorporate Data into Analysis: Use the timing and content of upcoming data releases as part of my broader analysis to make more informed trading decisions.
Conclusion
Despite this initial setback, my confidence in TMF remains intact due to its current valuation and my long-term outlook. The experience has reinforced the importance of preparation and awareness of external factors like economic data that can impact my trades. By learning from this mistake and incorporating these practices into my routine, I am optimistic about making more informed and successful trading decisions in the future.
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